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4.1 Overview

The deceleration in inflation witnessed

towards the end of 2008 continued fu rther

in 2009, due to favourable developments

in both demand side and supply side factors.

The rate of inflation, as measured by the Colombo

Consumers Price Index (CCPI) (2002=100),

decelerated to 4.8 per cent in December 2009,

on an year-on-year basis, from its peak level of28.2 per cent recorded in J une 2008. The effect

of stringent monetary policy adopted by the CBSL

during the previous two years and the decline in

commodity prices in the international market coupled

with improved domestic supply conditions and the

downward revision of administered prices, aided the

rapid deceleration in inflation. Inflationary pressure

exerted through increase in wages of public and

private sector employees was contained through

favourable developments in supply side factors,

enhanced labour productivity as well as the prudent

monetary policy pursued by the CBSL. The gradual

increase in the point-to-point inflation towards the last

quarter of 2009, from 0.7 per cent in September to

4.8 per cent in December 2009 was mainly a result of

the dissipation of the impact of the high base in 2008.

Meanwhile, the annual average inflation rate, which

had been decelerating continuously from the peak

of 23.4 per cent in October 2008, reached a single

digit level of 8.5 per cent in August 2009 and further

declined markedly to 3.4 per cent in December 2009.

This was the lowest annual average (end year)

inflation rate recorded since 1985. Meanwhile, the

core inflation, which measures the price movement

of non-food and non-energy items of the CCPI

basket, too followed a decelerating trend throughoutthe year reaching 5.9 per cent on an year-on-year

basis in December 2009 from 15.7 per cent in

December 2008. The annual average core inflation

also declined to 9.2 per cent in December 2009 as

compared to 13.6 per cent in December 2008.

Both the nominal and real wages of all three

sectors, namely the public sector, formal private

sector and informal private sector increased in

2009, compared to the previous year. With the

upward adjustments of the Cost of Living Allowance

(COLA) in J anuary and November 2009 by

Rs. 1,000 and Rs. 750 respectively, the nominal

wage rate indices of all categories of public sector

employees increased by around 9.4 per cent in 2009.

Public sector employees further benefitted from the

decelerating inflation experienced throughout the

year, leading to a real wage increase of around 5.7

PRICES, WAGES, EMPLOYMENT AND

PRODUCTIVITY

Chapter 4

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per cent in 2009, against the real wage decline in

2008. Similarly, the minimum wages for three major

categories of the formal private sector, governed

by the Wages Boards Trades increased, raising

the overall nominal wage rate index for the whole

sector by 4.9 per cent. As a result of the gradual

deceleration in inflation, they too enjoyed a real wage

increase of 1.6 per cent, on average, during the year.

Following a similar trend, both the nominal and real

wages of informal sector workers also increased in

2009.

The rate of unemployment which had been

declining over the past few years recording the

lowest level in 2008, began to increase mainly due

to the adverse impact of the global recession, on

several sectors of the economy. Since the thirdquarter of 2009, however, the rate of unemployment

started to decline indicating the resurgence of the

economy with the ongoing economic activities

and gradual recovery in the global economy.

Meanwhile, there was a change in the composition

of employment among the major industry groups,

with the increasing dominance of the Services sector

and the declining share of the Industry sector in total

employment. Public sector employment, private

sector employment and unpaid family workers grew

during the year. However, a decline was observedin the self-employed and employer categories. The

ongoing and planned infrastructure development

projects are likely to create more employment

opportunities. Increased activities in the Agriculture

sector, particularly in the Northern and the Eastern

Provinces would also generate employment

opportunities. Meanwhile, the improvement in labour

productivity in recent years continued. At the same

time, foreign employment, which amounted to one

fourth of the total domestically employed population,

continued to contribute significantly to the economy

in terms of foreign exchange earnings.

4.2 Prices

Price Movements and Contributory

Factors

Colombo Consumers Price index (CCPI)

The CCPI, the official consumer price index of

the country, recorded a 4.8 per cent increase on

an year-on-year basis and a 3.4 per cent increase

on an annual average basis, the lowest end year

annual average rate recorded for a period of

more than two decades. The Index rose by 9.8

index points from 203.7 in December 2008 to 213.5

in December 2009. The point-to-point change in

the index decreased steadily from 10.7 per cent in

J anuary to 0.7 per cent in September 2009, reaching

the lowest level recorded in more than five years.

It then increased gradually to reach 4.8 per cent in

December 2009. The annual average inflation rate

continued its declining trend throughout the year from

the peak level of 23.4 per cent in October 2008.

The decline in inflation in 2009 was consequential

upon both the demand and supply side factors.On the demand side, stringent monetary policy

measures implemented during the last two years

supported to curtail demand pressures in the

economy. Favourable developments on the supply

side, increased productivity as well as prudent

monetary policy measures helped to curtail any

demand pressure, which would have arisen as a

consequence of the increase in wages of public and

private sector employees. Improved domestic supply

conditions, mainly from the Northern and the Eastern

Provinces and the decline in international commodity

prices as well as the stable exchange rate lowered

the price pressure on the CCPI during the year.

Price increases in domestically produced

goods , which on average accounted for around

72.6 per cent of total monthly consumption

expenditure in 2009, largely impacted on

inflation during the year. The contribution from

domestically produced goods to the year-on-year

Chart 4.1 Colombo Consumers' Price Index (2002=100)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

2007 2008 2009

Percent

Annual Average Change % Point-to-Point Change %

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inflation increased from 75.4 per cent in J anuary

2009 to 100.6 per cent in December 2009, while that

from imported items declined from 24.6 per cent in

J anuary 2009 to -0.6 per cent in December 2009,

in line with the rapid easing of commodity prices in

the international market.

The major contribution to inflation came from

the Food and non-alcoholic beverages sub-

index, which has the highest weight of 46.7 per

cent in the CCPI. The point-to-point change in the

Food sub-index decreased rapidly from 10.2 per cent

at the beginning of the year to -1.1 per cent in April

2009, but increased thereafter, reaching 6.0 per cent

in December 2009. Overall inflation moved almost

in line with the Food-sub index due to its dominance

in the overall index. The Food sub-index contributed

40.1 per cent to the annual average change in the

overall CCPI during the year. The annual average

increase of the Food sub-index was 2.8 per cent as

at end 2009. The price increases infish, lime, garlic,

big onions and red onions, sugar, dhal, potatoes and

eggs were the key items which contributed to the

increase in the Food sub-index.

The decl ine in average prices of certain

domestic agricultural products , especially of

rice, pulses, vegetables and coconuts, due to

the increase in domestic supply conditions

contr ibuted to lower the price pressure. Despite

paddy prices recording increases in the middle and

the end of the year due to supply shortages resulting

from the bad weather conditions that affected the

Yala harvest, the average price of rice declined by 2.1

per cent during 2009 compared to 2008. Satisfactory

2008/2009 Maha harvest, the price ceiling imposed

by the government on rice, and duty exemption on

rice imports towards the end of the year, helped

Table 4.1 Changes in Price Indices

Sources : Department of Census and StatisticsCentral Bank of Sri Lanka

Average IndexPoint-to-Point

Percentage ChangeAnnual Average

Percentage Change

(a) Provisional

2009/2008(a)2008/2007Dec. 2009/

Dec. 2008(a)Dec. 2008/Dec. 2007

2009(a)20082007

CCPI(2002=100) 163.1 199.9 206.8 14.4 4.8 22.6 3.4WPI 2,924.4 3,653.6 3,500.9 0.7 13.3 24.9 -4.2GDP Deflator 298.3 315.1 - - 16.3 5.7

Index

(b) Revised

256.4 (b)

Table 4.2 Retail Prices of Key Imported and Domestically Produced Items

Dec. 2008/

Dec. 2007

Percentage Change

Source : Central Bank of Sri Lanka(a) Provisional

2008/

2007

Dec.2008

Dec.2007

20082007

CCPI(2002=100)Weight %

Unit Annual Average Point-to-Point

Price - Rs.

Annual AverageItem

Dec. 2009/

Dec. 2008(a)

Dec.2009(a)

2009(a)2009/

2008(a)Domestic Rice - Samba kg 2.8 50.98 76.53 76.57 63.71 78.64 82.41 50.1 0.1 23.4 4.8

Rice - Kekulu (Red) kg 0.9 44.56 64.65 63.64 55.32 66.38 66.78 45.1 -1.6 20.0 0.6Rice - Kekulu (White) kg 0.6 38.78 60.66 59.85 51.68 62.63 63.22 56.4 -1.3 21.2 0.9Rice - Nadu kg 0.5 44.45 65.29 65.44 56.99 68.43 69.45 46.9 0.2 20.1 1.5Coconut (medium) Nut 5.4 21.83 28.88 23.02 27.83 24.87 27.53 32.3 -20.3 -10.6 10.7Fish - Kelawalla kg 1.1 407.10 471.50 510.18 414.72 490.07 502.60 15.8 8.2 18.2 2.6Beans kg 0.5 83.51 102.60 95.41 82.93 110.27 116.04 22.9 -7.0 33.0 5.2Brinjals kg 0.2 52.12 64.57 60.03 55.99 81.49 82.53 23.9 -7.0 45.5 1.3Eggs One 0.4 9.31 10.16 11.44 11.64 11.55 14.53 9.1 12.6 -0.8 25.8

Imports Sugar kg 1.1 54.30 63.58 82.09 53.21 66.12 88.12 17.1 29.1 24.3 33.3Milk Powder - Anchor 400g 3.8 189.32 274.63 254.30 268.82 267.32 232.77 45.1 -7.4 -0.6 -12.9Red Dhal kg 0.8 103.80 189.11 199.37 117.64 205.31 177.66 82.2 5.4 74.5 -13.5Wheat Flour kg 0.2 55.36 73.86 71.75 66.12 71.81 70.62 33.4 -2.9 8.6 -1.7

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rice price to decline. The prices of vegetables were

also relatively lower compared to the previous year,

although increases were reported in certain months

of the year. The domestic price of potato, on average,

increased by 19.5 per cent in 2009 compared to the

previous year, due mainly to the decreased supply

resulting from the unfavourable weather conditions

that prevailed in potato growing areas. The average

price of coconut and coconut oil decreased by 22.2

per cent and 24.0 per cent, respectively, in 2009

compared to 2008.

The average price offish and seafood increased

by around 4.4 per cent during 2009 largely due

to increased demand and supply fluctuations.

Nevertheless, in line with the commencement of the

fishing season in J uly and the relaxation of limitations

onfishing in the Northern and Eastern coastal areas,

the fish supply increased since J une 2009 and the

prices offish moderated.

The administrative price revisions effected

during the year has had an impact on the price

of both domestically produced and imported

goods. The fuel price reductions effective from

end December 2008 (petrol by Rs. 10, diesel by

Rs. 10 and kerosene by Rs. 2 per litre) has had

a direct and indirect impact on prices. However,

the upward adjustment of the price of petrol, diesel

and kerosene by Rs. 10, Rs. 3 and Re. 1 per litre,

respectively, in J uly 2009 in line with the increase in

the import price of crude oil from US dollars 41.71 per

barrel in J anuary 2009 to US dollars 72.8 per barrel

in J une 2009, exerted a slight upward pressure on

prices during the rest of the year. The impact of the

reduction of the price of petrol by Rs. 15 per litre

w.e.f. December 30, 2009 would be felt in 2010.

Meanwhile, the LP gas prices were revised on six

occasions in 2009. The price of a 12.5 kg cylinder

of LP gas of Shell and Laugfs was reduced by

Rs. 166 (9.3 per cent) and Rs. 276 (16.4 per cent), to

Table 4.3 Administered Price Revisions in 2008 and 2009

2008/2007

Percentage Change

2008

UnitItem

2007

Price (Dec.) - Rs.

2009 2009/2008Cigarettes (Gold-leaf) Each 14.00 16.00 18.00 14.3 12.5

Cigarettes (Bristol/Viceroy) Each 12.00 13.00 14.00 8.3 7.7

Coconut Arrack 750 ml 525.00 550.00 610.00 4.8 10.9

Extra Special Arrack 750 ml 450.00 500.00 565.00 11.1 13.0

Diesel 1 ltr. 75.00 70.00 73.00 -6.7 4.3

Kerosene 1 ltr. 68.00 50.00 51.00 -26.5 2.0

Petrol 1 ltr. 117.00 120.00 115.00 2.6 -4.2

Gas- Shell 12.5kg 1,313.00 1,619.00 1,550.00 23.3 -4.3

Gas- Laugfs 12.5kg 1,248.00 1,403.00 1,421.00 12.4 1.3

Furnace Oil (1000) 1 ltr. 52.70 32.70 42.70 -38.0 30.6

Furnace Oil (1500) 1 ltr. 51.70 31.70 41.70 -38.7 31.5

Furnace Oil (3500) 1 ltr. 46.65 25.00 36.65 -46.4 46.6

Electricity - Fixed Charges Tariff Block

First 30 units 60.00 60.00 60.00 0.0 0.0

31 - 60 units 90.00 90.00 90.00 0.0 0.061 - 90 units 120.00 120.00 120.00 0.0 0.0

91 - 180 units 180.00 180.00 180.00 0.0 0.0

Above 180 units 240.00 240.00 240.00 0.0 0.0

Electricity - Unit Charges Tariff Block

First 30 units 3.00 3.00 3.00 0.0 0.0

31 - 60 units 4.70 4.70 4.70 0.0 0.0

61 - 90 units 7.50 7.50 7.50 0.0 0.0

91 - 180 units 14.00 16.00 16.00 14.3 0.0

Above 180 units 19.80 25.00 25.00 26.3 0.0

Bus Fare - - - 17.6 5.3

Source : Central Bank of Sri Lanka

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Box 6 Introducing a New Core Inflation Measure for Sri Lanka

Concept, Measures and International Practices

Price stability, which refers to achieving and

maintaining a low and stable level of inflation, is

the prime objective of many central banks. In order

to achieve price stability, central banks conduct

monetary policy with a forward looking perspective

as monetary policy actions affect inflation with a time

lag. Headline inflation1 is the widely used measure

of inflation for the conduct of monetary policy as it

is a simple and easily understood measure. Headline

inflation includes all price movements including those

driven by seasonality, changes in government taxes,

and international commodity prices. By including all

items, particularly items with high price volatility,

headline inflation tends to be inherently noisy, not

reflecting changes and the directions in the underlying

rate of inflation.

Therefore, although headline inflation provides useful

information for setting and conducting monetary policy,

policymakers are required to understand underlying

trends in prices driven by demand pressures in the

economy, as otherwise it could lead to wrong policy

decisions, which could adversely affect macroeconomic

stability. Hence, policymakers are required to track

the persistent or underlying movements in price tobetter calibrate their monetary policy decisions. The

measure of core inflation provides such information

about underlying inflationary trends.

Although the term core inflation is widely used in

contemporary monetary policy literature, there is

no commonly accepted theoretical definition for it.

Bryan and Cecchetti (1993), for example, suggest

that core inflation relates to the growth rate of the

money supply. Quah and Vahey (1995) define core

inflation as that component of measured inflation

that has no medium to long-run impact on real output,

while Blinder (1997) identifies core inflation with the

durable part of inflation. Mishkin (2007) defines core

inflation as a measure of inflation that excludes the rate

of increase of prices for certain volatile components in

price indices.

Since core inflation cannot be directly observed,

several alternative methods have been proposed to

measure core inflation.2 Empirical studies have found

that core inflation measures derived using different

methodologies yield different outcomes that can be

used for different purposes in the conduct of monetary

policy. Amongst the various methodologies, the most

commonly used approach to measure core inflation

is the exclusion method. The main advantages of

exclusion based core inflation measures are, their

availability on a timely basis, transparency, simplicity,

and comparability. However, removing items on an

arbitrary basis can be viewed as the main drawback of

exclusion based measures of core inflation.

Measuring Core Inflation in Sri Lanka

Actions taken by the Central Bank of Sri Lanka

(CBSL) to achieve the price stability objective is

mainly guided by the movement of average changes

and year-on-year changes in the Colombo Consumers

Price Index (CCPI) compiled by the Department of

Census and Statistics (DCS). However, headline

inflation in Sri Lanka is subject to large variations

resulting mainly from excessive fluctuations in

food prices and administratively decided changes

in energy and transport prices. Major fluctuations

in food prices due to changes in weather conditionsand the impact of external price shocks that create

transitory movements in the CCPI persist only for a

temporary period. In addition, administered prices,

which mainly include energy and transport, do not

respond to monetary policy actions and one-off

changes of such prices tend to distort general price

trends. Such volatile items account for a significant

percentage of the price index, thereby generating

erratic movements in the overall index3. This situation

warrants monitoring core inflation measures, which

are free from high volatility and abnormal shocks,in order to trace underlying inflation trends in Sri

Lanka.

CBSL has been using several core inflation measures

to facilitate the conduct of monetary policy. In 1997,

CBSL compiled the first series for core inflation which

was derived by removing items with administered

prices from the CCPI (1952 =100). Since then,

1 Headline inflation refers to the rate of change in the consumer price index and measures the total inflation within an economy.

2 A detailed analysis of the methods used to compile core inflation measures is presented in the Box Article on Core Inflation Central Bank Annual Report 2006.

3 For instance, the first 10 most volatile items account for approximately 19 per cent of the total index, while the first 20 most volatile items account for about 40per cent of the total index.

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4 Statistical criteria outlined in the literature such as volatility of core inflation, long-run relationships and causalities between headline inflation, core inflation andmoney supply and the predictive power of core inflation measures were examined.

Dec-04 13.0 9.0 9.9 9.1 9.7 8.2

Dec-05 7.4 11.0 9.2 10.3 8.5 10.8

Dec-06 13.5 10.0 8.6 8.5 12.4 9.7

Dec-07 18.8 15.8 8.1 7.7 17.0 12.8

Dec-08 14.4 22.6 15.7 13.6 13.3 19.5

Mar-09 5.3 18.7 14.2 15.2 8.1 16.7

Jun-09 0.9 12.5 7.7 15.2 6.3 12.9

Sep-09 0.7 6.6 5.4 12.1 5.8 9.1

Dec-09 4.8 3.4 5.9 9.2 5.8 7.0

Period Headline Inflation Core Inflation

Current Measure 1/ New Measure 2/Year-on-

year

Year-on-

yearYear-on-

year

Annual

Average

Annual

Average

Annual

Average

Table B 6.1Movements in Headline and

Core Inflation Measures (% Change)

1/ Excludes Food and Energy Categories of CCPI (2002=100), accounts for

54.9 per cent of the total index.2/ Excludes Fresh Food, Rice, Coconut, Energy and Transport Categories of

CCPI (2002=100), accounts for 31.1 per cent of the total index.

References :

Blinder, A. (1997). Commentary on Measuring Short-Run Inflation for Central

Bankers. Federal Reserve Bank of St. Louis Review, May/June, pp. 157-160.

Bryan, Michael F., and Stephen G. Cecchetti. (1993). Measuring Core Inflation.

NBER Working Paper No. 4303, National Bureau of Economic Research,

Cambridge.

Mishkin, Frederic S. (2007). Headline versus Core Inflation in the Conduct of

Monetary Policy. Remarks at the Business Cycles, International Transmission

and Macroeconomic Policies Conference, Montreal, October.

Quah, Danny and Shaun P. Vahey. (1995). Measuring Core Inflation.Economic

Journal, Vol. 105 (September), pp. 1130-44.

several attempts were made to improve the measure of

core inflation based on different techniques and some

of these measures were published for the information

of the general public. With the revision to the CCPI

(2002 = 100) by the DCS in 2007, a new core inflation

measure was derived by removing the entire food

and energy categories of the total index and has been

published since early 2008.

With a view to improving the methodology and introducing

a new core inflation measure along with the proposed

revision to the CCPI based on the Household Income

and Expenditure Survey 2006/07, CBSL has compiled a

series of core inflation measures based on international

best practices, while addressing several weaknesses of the

existing measure. These measures were evaluated based

on statistical properties4. The results indicate that different

measures fulfill different properties of a representative

core inflation measure, and provide a reliable guide to the

trends in underlying inflation.

When comparing the relative performance of alternative

core inflation measures, exclusion appears to be the

most appropriate method for measuring core inflation

in Sri Lanka. Accordingly, a new core inflation measure

was derived by excluding fresh food, rice, coconut,

energy and transport categories from the headline

index. Excluding only these categories was considered

appropriate given the high volatility in fresh food prices,

such as fish, vegetables, and fruit and also some other

food prices like rice and coconut and administratively

determined energy and transport prices. This measure

broadly complies with international best practices,

particularly with regard to the extent of exclusion and

the items excluded. It also fulfils many statistical criteria

of a representative core inflation measure and broadly

follows the general trend in headline inflation.

The new core inflation measure is expected to facilitate

the conduct of monetary policy by CBSL, as it provides

greater information about persistent movements

in inflation than headline inflation. Also, given its

simplicity and computability, this measure would bebetter understood by the general public, thus helping

to manage expectations. However, as price stability

ultimately involves controlling overall headline

inflation, CBSL would continue to pay attention to

headline inflation, while monitoring the trends in core

inflation to ensure a thorough and careful analysis of the

forces which drive inflation dynamics in the economy.

Rs.1,619 and Rs.1,403 respectively, w.e.f. December31, 2008. As a result of the net impact of the six

price revisions in 2009 (from both distributors), the

domestic price of Shell gas declined by 4.3 per cent

to Rs.1,550 and the price of Laugfs gas increased

by 1.3 per cent to Rs.1,421, by end of the year.

In l ine wi th the decl ine in in ternat ional

commodity prices, local prices of key consumer

items also declined. Decrease in freight charges at

the beginning of the year also might have contributed

towards the decline in the prices. Accordingly, theaverage import price of wheat flour, milk powder,

palm oil and vegetable oil declined. However, the

price of dhal and sugar increased in the international

market in line with supply shortages of the same.

To stabilize their domestic prices, the government

imposed a price ceiling on these commodities at

the beginning of April 2009. The price ceiling was

removed from May 01, 2009. The government

also made arrangements to sell several key food

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items at a lower price through co-operative stores.

Accordingly, the price of sugar, dhal and cannedfish

was reduced w.e.f. November 07, 2009. Further,

the import tax on milk powder and wheat flour were

reduced by Rs.15 and Rs.10 per kg respectively,

w.e.f. J uly 20, 2009 and December 18, 2009.

New taxes and levies also have had an impact

on prices. The introduction of a new tax Fixed Line

Subscriber Levy on telephone usage w.e.f. J anuary

15, 2009 and the Nation Building Tax of 1 per cent

w.e.f. March 2009 had a direct impact on the CCPI.

The Nation Building Tax was increased to 3 per cent

effective from May 2009. The increase in water tariff

by the National Water Supply and Drainage Board

effective from February 15, 2009 also contributed to

the increase in the price index.

Other significant contribu tions to the increase

in the index came from the sub-indices of Health,

Recreation and culture, and Education which

contributed 19.3 per cent, 10.7 per cent and 9.3

per cent, respectively, to the annual average

increase in 2009 despite the weights attached

to them being relatively low. The increase in

the Health sub-index was mainly attributed to the

price increases in the services by private hospitals,

pharmaceuticals, specialist consultations andmedical laboratory services. Increases in hotel

charges and tuition fees caused the sub-indices

of Recreation and culture, and Education to move

upward. Meanwhile, the Transport sub-group

recorded a negative contribution of 2.1 per cent to the

annual average inflation. The downward revisions

in fuel prices and public transport charges caused

the Transport sub-group to contribute negatively to

inflation. The contribution of all the other sub-groups

ranged from 1.9 per cent to 6.6 per cent.

The base year of CCPI is expected to be revised

from 2002 to 2006/2007 in 2010. In order to reflect

more recent changes in household consumption

pattern owing to improvement in income levels and

the changes in consumer tastes and preferences,

the DCS has initiated action to update the basket of

items and their weights in the CCPI, based on the

Household Income and Expenditure Survey (HIES)

conducted in 2006/2007. The updated version of the

CCPI is expected to be released in 2010.

Wholesale Price Index (WPI)

In f la t ion at the pr imary market level as

measured by the WPI showed high volatility in

2009. On a point-to-point basis a deflationary trend

was observed during the first nine months of 2009.The point-to-point increase of the WPI which was at a

peak level of 42.1 per cent in May 2008, decelerated

rapidly to -0.4 per cent in September 2009. The trend

reversed thereafter and by end 2009 the point-to-

point increase of the WPI reached 13.3 per cent.

On an annual average basis, the WPI declined

by 4.2 per cent as at end 2009.The annual average

increase of the sub-index for the food category was

0.6 per cent. The sub-indices for Petroleum, Metal

products, Electrical products and Miscellaneousproducts declined on an annual average basis by

22.8 per cent, 7.6 per cent, 1.0 per cent and 24.4

per cent, respectively in 2009. When the source-wise

classification of the WPI is considered, prices in the

Domestic category increased modestly by 3.5 per

cent on an annual average basis during the year,

while prices in the Import and Export categories

recorded declines of 10.9 per cent and 6.7 per

cent, respectively, indicating that it was mainly

international price developments that exerted

downward pressure on the WPI. P rice declines inwheat grain, wheat flour, kerosene, diesel, petrol

and milk powder contributed to the decline in the

prices in the Import group, while price declines in

coconut, coconut oil and rubber caused the decline

in the Export group. When the end-use classification

of the WPI is considered, prices in the Intermediate

group dropped sharply by 21.8 per cent on an

annual average basis, at end year while prices

in both the Consumer and Investment categories

registered increases of 2.6 per cent and 2.4 per cent,

respectively. The decline in the prices of tobacco,

wheat grain, kerosene, diesel, cocoa, rubber and

insulated wire were responsible for the decline in

prices in the Intermediate category.

GDP Deflator

The GDP deflator, which is an alternative

measure of inflation, indicated a deceleration in

the overall pr ice increase in 2009 to 5.7 per cent

as compared to 16.3 per cent recorded in 2008. In

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contrast to the trend observed in the last two years,

the Agriculture sector recorded the lowest inflation

rate of -0.2 per cent, as against the highest rate of

31.3 per cent recorded in 2008. The highest inflation

rate of 6.7 per cent was recorded in the Services

sector in 2009, which however was significantly

lower compared to 14.4 per cent recorded by this

sector in 2008. The inflation in the Industry sector

also decreased to 6.2 per cent in 2009 compared

to 14.2 per cent in 2008.

4.3 Wages

The wages of both the public and private

sector employees, reported increases in nominal

terms in 2009. Wage rate indices of the public

sector, minimum wage rate indices of the formalprivate sector (whose wages are governed by the

Wages Boards Trades) and the daily wages of

the informal private sector, reported increases in

nominal terms in 2009 as compared to the previous

year. Simultaneously, these employees enjoyed an

increase in their real wages too in 2009, due mainly

to the deceleration in inflation.

Public Sector Wages

Real wages of the public sector increased in

2009. With the declining inflation and the increase

in nominal wages on account of the adjustment in

the monthly COLA paid to public sector employees

on two occasions during the year, a significant gain

in real wage rate indices of all categories of public

sector employees was observed in 2009, as against

the real wage losses suffered by them in 2008. The

increase in the nominal wage rate indices of public

sector employees, which includes wages of non-

executive employees, school teachers and minoremployees, was due mainly to the enhancement

of the monthly COLA for public sector employees

by Rs.1,000 and Rs.750 w.e.f. J anuary 2009

and November 2009, respectively. With these

upward revisions, the monthly COLA payable to

all employees in the Public Service, Provincial

Public Service and Armed Forces, rose from Rs.

3,500 to Rs. 5,250 in 2009. Similarly, the monthly

COLA payable to public servants, who are drawing

daily paid emoluments, was also increased fromRs. 116.66 to Rs. 150 in January 2009 and further

to Rs.175 in November 2009. Mainly due to these

increases, the overall nominal wage rate index of

government employees, increased by 9.4 per cent.

Accordingly, on average, wage indices of non-

Table 4.4 Sectoral Deflators and GDP Deflator

Sector IndexPercentage Change

Sources : Department of Census and StatisticsCentral Bank of Sri Lanka

(a) Revised(b) Provisional

2008/2007(a)20082007(a) 2009/2008(b)2009(b)

Agriculture 260.7 342.2 341.7 31.3 -0.2Industry 266.1 304.0 322.9 14.2 6.2Services 249.3 285.1 304.2 14.4 6.7GDP 256.4 298.3 315.1 16.3 5.7

Table 4.5 Wage Rate Indices

Nominal Real (a)Real (a)Nominal

2008 2009(b)20072008 2009(b)20072008 2009(b)20072008 2009(b)2007

(a) Real wage rate indices are based on CCPI (2002=100)(b) Provisional

Sources : Department of LabourCentral Bank of Sri Lanka

Percentage ChangeIndex

(December 1978=100)

Employment Category

1. Government employeesCentral government employees 3,828.4 4,116.1 4,502.9 171.6 150.4 159.0 21.5 7.5 9.4 5.0 -12.4 5.7

Non-executives 3,493.4 3,749.5 4,082.4 156.6 137.0 144.2 22.4 7.3 8.9 5.7 -12.5 5.3Minor employees 4,172.7 4,494.7 4,943.5 187.0 164.2 174.6 20.5 7.7 10.0 4.1 -12.2 6.3

Government school teachers 2,740.0 2,938.6 3,215.3 122.8 107.4 113.5 18.9 7.2 9.4 2.7 -12.5 5.7

2. Workers in Wages Boards TradesAll Wages Boards Trades 1,648.8 2,070.4 2,171.4 73.6 75.5 76.7 21.4 25.6 4.9 4.1 2.6 1.6

Workers in agriculture 1,821.4 2,286.6 2,349.4 81.3 83.5 83.0 16.2 25.5 2.7 -0.3 2.6 -0.6Workers in industry and commerce1,522.4 1,877.5 2,054.0 67.9 68.5 72.5 39.6 23.3 9.4 19.6 0.9 5.8Workers in services 1,057.1 1,370.8 1,545.8 47.1 49.9 54.6 35.6 29.7 12.8 16.0 5.9 9.4

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executive officers, minor employees and government

school teachers in 2009 rose by 8.9 per cent, 10.0

per cent and 9.4 per cent, respectively, in nominal

terms compared to the range of 7-8 per cent in 2008.

As a combined outcome of the developments in

nominal wage increases and deceleration in inflation,

the government employees enjoyed an increase

in their real wages during 2009. Accordingly, non-

executive officers, minor employees and government

school teachers enjoyed real wage increases of 5.3

per cent, 6.3 per cent and 5.7 per cent, respectively

in 2009 compared to the real wage losses incurred

in the range of 12.2 12.5 per cent in 2008.

Consequently, the overall real wage rate index of

central government employees increased by 5.7 per

cent over the previous year.

Formal Private Sector Wages

Movements of wages of the formal private

sector are monitored through the minimum wage

rate indices that cover only the minimum wages

of employees whose wages are administered

by regulations under the Wages Boards Trades.

The minimum wage rate indices in the three major

categories of the formal private sector, namely,

Agriculture, Industry and Commerce, and Services

increased in nominal terms by 2.7 per cent, 9.4 per

cent and 12.8 per cent, respectively, in 2009, while

the overall wage rate index for the whole sector

recorded an increase of 4.9 per cent over 2008. The

increase was mainly attributable to the increases

in minimum wages of workers in the Industry and

Commerce sector and the Services sector in July

2008.

When the nominal wage rate indices were

adjusted for inflation, employees in Industry and

Commerce, and Services sectors enjoyed an

increase in their real wages in 2009.The overall

real wage rate index for employees in Wages Boards

Trades, on average, increased by 1.6 per cent in2009 over the previous year, mainly due to the sharp

deceleration in the inflation rate. Employees in the

Services sector and Industry and Commerce sector

enjoyed a significant increase in their real wages by

9.4 per cent and 5.8 per cent, respectively, during

the year under review. However, the real wages

of employees in the Agriculture sector decreased

marginally by 0.6 per cent during 2009, compared

to an increase of 2.6 per cent in the previous year.

Table 4.6 Informal Private Sector Daily Wages by Sector and Gender (a)

Sector Nominal Real (b)

1. Agriculture SectorTea

Male 375 440 496 17.4 12.6 -4.2 8.8Female 263 305 356 16.1 16.5 -5.2 12.6

RubberMale 389 500 532 28.4 6.5 4.8 2.9Female 277 377 416 36.3 10.1 11.2 6.4

Coconut (d)

Male 479 590 652 23.1 10.5 0.5 6.8Paddy

Male 456 562 615 23.2 9.4 0.5 5.8Female 336 395 423 17.6 7.0 -4.0 3.5

2. Construction Sector (d)Carpentry

Master Carpenter - Male 732 844 932 15.3 10.4 -5.9 6.7Skilled and Unskilled Helper- Male 479 558 617 16.6 10.6 -4.9 6.9

MasonryMaster Mason - Male 727 837 935 15.1 11.7 -6.1 8.0Skilled and Unskilled Helper- Male 474 561 627 18.4 11.7 -3.4 8.0

2009(c)20082009(c)20082009(c)20082007

(a) Wage Information were based on monthly wages from 90 centres.(b) Real wage percentage changes are based on CCPI (2002=100).(c) Provisional(d) Female participation is minimal in the Coconut and Construction sectors.

Source : Central Bank of Sri Lanka

Percentage ChangeAnnual Average (Rs.)

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Informal Private Sector Wages

Wages in the informal private sector wh ich are

compiled based on a regular survey increased in

nominal terms for all activities. Generally, wages

in the informal sector tend to get adjusted to reflectboth demand and supply conditions in the economy

and the level of the reservation wage of labour.

The information on the daily wage of the informal

private sector for the Agriculture and Construction

sectors, collected under the Country Wide Data

Collection System (CWDCS), revealed a nominal

growth in wages in 2009. Informal sector wages in

the Agriculture and Construction sectors increased

by 10.0 per cent and 11.1 per cent, respectively,

in 2009 compared to the previous year. Within the

Agriculture sector, the average daily wage of thesub-categories of Paddy, Coconut, Rubber and Tea

increased by 8.4 per cent, 10.1 per cent, 8.0 per

cent and 14.2 per cent, respectively in 2009 against

2008. The rate of increase in the daily wage of the

sub-categories in the Agricultural sector varied partly

due to the diversity among the different activities and

the supply of labour. In addition, the demand made

by these workers for a higher daily wage, in order to

maintain their real wage at a certain level also had

an impact on wage rates. Similarly, the increase in

prices of certain export items, especially, tea and

rubber towards the latter part of the year, enabled

producers to make higher payment for the service

of labour rendered. A significant increase in the real

wages of the employees in all the sub-categories in

the Agriculture sector and Construction sector were

recorded in 2009. Accordingly, the daily real wage

of Tea, Rubber, Coconut and Paddy sub-sectors

in the Agricultural sector on average increased by

10.4 per cent, 4.4 per cent, 6.5 per cent and 4.8

per cent, respectively. Meanwhile, the wage for

carpentry and masonry in the Construction sector

recorded an increase of around 7 - 8 per cent in real

terms, respectively, possibly due to the shortage of

skilled workers in certain areas. This was a notable

improvement against the real wage losses suffered

by these workers in 2008.

1 The levels and trends of labour force, employment and unemployment in Sri Lanka are based on the Quarterly Labour Force Survey (QLFS) conductedby the DCS. The coverage of the QLFS was extended to the Eastern Province in thefirst quarter of 2008. Though the DCS plans to expandits sample coverage to the entire country, the Northern Province was not covered fully by the QLFS during the last few years due to the unsettledconditions prevailing in some districts of this province. Accordingly, the labour force data excluding the Northern Province has been used in theanalysis, unless otherwise stated.

Table 4.7 District-wise Population

Source: Registrar Generals Department

000 Persons

Colombo 2,488 2,521 33 1.3

Kandy 1,396 1,415 19 1.4Ratnapura 1,099 1,113 14 1.3

Badulla 861 874 13 1.5

Kurunegala 1,535 1,550 15 1.0

Gampaha 2,152 2,165 13 0.6

Galle 1,063 1,074 11 1.0

Anuradhapura 809 820 11 1.4

Kalutara 1,118 1,128 10 0.9

Matara 822 831 9 1.1

Nuwara Eliya 749 755 6 0.8

Ampara 624 634 10 1.6

Batticaloa 530 537 7 1.3

Puttalam 760 770 10 1.3

Jaffna 603 607 4 0.7

Matale 483 490 7 1.4

Trincomalee 361 368 7 1.9

Hambantota 558 565 7 1.3

Moneragala 430 435 5 1.2

Polonnnaruwa 400 405 5 1.3

Mulaitivu 150 154 4 2.7

Kilinochchi 150 154 4 2.7

Vavuniya 167 169 2 1.2

Kegalle 807 813 6 0.7

Mannar 102 103 1 1.0

Total 20,217 20,450 233 1.1

District 2009(a) Change(a)PercentageChange(a)

(a) Provisional

2008

4.4 Population, Labour Force andEmployment

Population

The mid-year population is estimated at 20.45million in 2009, an increase of 1.1 per cent

compared with 1.0 per cent growth recorded in

2008. Population in all districts increased in 2009.

High increases in population were recorded in

Colombo, Kandy, Kurunegala, Ratnapura, Gampaha,

Badulla, Galle and Anuradhapura Districts, which

together contributed over 55 per cent to the overall

growth in 2009.

Labour Force

According to the QLFS1, the labour force, which

is defined as the economically active population

aged 10 years and above, decreased marginally

by 0.1 per cent to 8.07 million in 2009 compared

to 8.08 million in the previous year. Meanwhile,

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the labour force, excluding both the Northern and

the Eastern Provinces, remained at the same level

of 7.57 million in 2009.

The total labour fo rce comprised of 7.60 million

employed and 0.47 million unemployed persons.

Meanwhile, the labour force participation rate

(LFPR), which is the ratio of the labour force to the

total population aged 10 years and above, decreased

to 48.7 per cent in 2009 from 49.5 per cent in the

previous year. This decrease was seen in both male

and female LFPRs which were reported at 66.6 per

cent and 32.8 per cent, respectively. The genderanalysis of the LFPR over the years had shown that

the participation rate of males has been almost twice

that of females, throughout the recent past.

Employment

According to the QLFS, the number of employed

persons2 decreased by 0.6 per cent to 7.60 mil lion

in 2009 as compared to 7.65 milli on in 2008. This

decline was due to the weaker demand for labour

resulting from the general slowdown in economic

activities during the year. Similarly, the number of

employed persons excluding both the Northern and

the Eastern Provinces, also marginally decreased

by 0.5 per cent to 7.14 million in 2009 compared to7.18 million in the previous year.

Table 4.8 Household Population, Labour Force and Labour Force Participation

Item2009 (a)

Household Population (c) 000 Persons 15,048 15,079 16,320 15,353 15,348 15,475 15,415 15,398 16,569 16,493 16,667 16,585 16,578

Labour Force 000 Persons 7,489 7,569 8,082 7,659 7,469 7,626 7,536 7,572 8,160 7,961 8,122 8,051 8,074Employed 7,042 7,175 7,648 7,251 6,999 7,184 7,125 7,140 7,710 7,465 7,642 7,593 7,602Unemployed 447 394 434 408 470 442 411 433 450 496 480 459 471

Labour Force Participation Rate ( d) per cent 49.8 50.2 49.5 49.9 48.7 49.3 48.9 49.2 49.2 48.3 48.7 48.5 48.7Male 67.8 67.9 68.0 67.4 66.5 66.3 66.5 66.7 67.2 66.0 66.2 66.5 66.6Female 33.4 34.3 33.0 34.3 32.8 34.3 33.5 33.7 33.3 32.0 33.2 32.9 32.8

AnnualQ4Q3Q22008 (a)2007 (a)

Source: Department of Census and Statistics

Q1

(a) Data exclude both Northern and Eastern Provinces.(b) Data exclude Northern Province.(c) Aged 10 years and above.(d) Labour force as a percentage of household population aged 10 years and above.

2008 (b)AnnualQ4Q3Q2Q1

2009 (b)

The QLFS conducted by the DCS defines an employed person as one who engaged in some kind of work for pay, profit or family gain (unpaid) duringthe survey period. According to the status of employment, persons working as paid employees, employers, own account workers(self-employed),or unpaid family workers during the survey period were considered as employed persons in the QLFS. This includes persons with a job but not at workduring the survey period. Employees temporarily absent from work due to illness, bad weather or labour disputes are also considered as employed.

2

Table 4.9 Employment by Economic Activity

Sector

000 Persons Percentage of Total Employment

Agriculture 2,202 2,344 2,490 2,460 2,227 2,292 2,295 2,319 2,613 2,383 2,426 2,481 2,476 31.3 32.7 32.6 32.5 32.6

Industry 1,874 1,888 2,005 1,806 1,804 1,833 1,848 1,823 1,894 1,914 1,912 1,921 1,910 26.6 26.3 26.2 25.5 25.1Manufacturing 1,331 1,355 1,414 1,297 1,251 1,308 1,349 1,301 1,349 1,310 1,353 1,380 1,348 18.9 18.9 18.5 18.2 17.7

Construction (c) 543 533 590 509 552 526 499 522 546 604 559 541 562 7.7 7.4 7.7 7.3 7.4

Services 2,966 2,943 3,154 2,985 2,969 3,059 2,982 2,999 3,202 3,168 3,304 3,191 3,216 42.1 41.0 41.2 42.0 42.3Trade and hotels, etc. 1,051 1,028 1,095 1,055 996 1,086 1,050 1,047 1,113 1,074 1,172 1,115 1,119 14.9 14.3 14.3 14.7 14.7

Transport, storage and communication 457 426 448 408 445 407 418 420 430 467 437 447 445 6.5 5.9 5.9 5.9 5.9

Finance, insurance and real estate 215 236 241 243 221 216 204 221 246 229 222 210 227 3.1 3.3 3.2 3.1 3.0

Personal services and other 1,243 1,253 1,370 1,280 1,307 1,349 1,514 1,362 1,413 1,398 1,473 1,419 1,426 17.7 17.5 17.9 19.1 18.8

Total employment 7,042 7,175 7,648 7,251 6,999 7,184 7,125 7,140 7,710 7,465 7,642 7,593 7,603 100.0 100.0 100.0 100.0 100.0

Percentage of labour force 94.0 94.8 94.6 94.7 93.7 94.2 94.5 94.3 94.5 93.8 94.1 94.3 94.2

2009 (b)2007(a)

(a) Data exclude both Northern and Eastern Provinces.(b) Data exclude Northern Province.(c) Mining and quarrying, electricity, gas and water categorised under Construction.


Q1 Q2 Q3 Q4 Annual2008(a)

2008(b) Q1 Q2 Q3 Q4 Annual

2007(a)

2008(a)

2008(b)

2009(a)

2009(b)

2009 (a)

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There was a change in the composition of

employed population, among the major industry

groups between these two periods. The share of

the Services sector, in total employment increased

to 42.3 per cent in 2009 from 41.2 per cent in the

previous year. The Services sector made the largest

contribution to the total economic growth during

the reference period furthering this increase. The

increase in employment in the Services sector was

mainly seen in the Personal services, and Trade

and hotel services categories. Meanwhile, the share

of employment in the Agriculture sector remained

unchanged at 32.6 per cent in 2009. However, the

share of employment in the Industry sector declined

from 26.2 per cent to 25.1 per cent during the year.

The drop in contribution of employment in the

Industry sector to the total employment was due

mainly to the lower employment in the Manufacturing

and Construction sectors.

In terms of employment status, the share of

the public sector employees, private sector

employees and unpaid family workers increased

in 2009, while that of employers and own account

workers declined, as compared to 2008. The

employment in the private sector, which had the

major share of 42.1 per cent as against 15.5 per

cent in the public sector, continued its dominance in

generating employment opportunities during 2009.

Unemployment

The declining t rend in the unemployment rate

over the past few years reversed since the fi rs t

quarter of 2009, due largely to the slowdown of

economic activities corresponding to the global

economic crisis. According to the QLFS, the

unemployment rate increased to 5.8 per cent in 2009

as compared to 5.4 per cent recorded in 2008. The

total number unemployed was estimated at 471,000

for 2009, which was higher than that of 434,000 in

the previous year. Meanwhile, the unemployment

rate, excluding both the Northern and the Eastern

Provinces, also increased to 5.7 per cent from that

of 5.2 per cent between the two periods. However,

recovery of the domestic economy, planned and

ongoing development projects, reconstruction,resettlement and rehabilitation programmes in the

Northern and the Eastern Provinces, coupled with

expected global recovery would generate a higher

level of employment opportunities in 2010. In fact,

unemployment in the last two quarters of the year

declined gradually indicating that a recovery is under

way.

Table 4.10 Status of Employment

Per cent

Source: Department of Census and Statistics(a) Data exclude both Northern andEastern Provinces.

(b) Data exclude Northern Province.

2007 (a) 13.8 42.7 2.8 30.4 10.3 100.02008 (a) 14.9 41.1 3.0 30.3 10.8 100.02008 (b) 15.2 41.2 2.9 30.3 10.5 100.02009(Annual)(a) 15.2 42.1 2.7 29.0 11.0 100.0

1st Quarter 15.5 41.4 2.7 28.4 12.1 100.02nd Quarter 15.1 43.0 2.9 28.6 10.5 100.03rd Quarter 15.7 42.5 2.9 28.1 10.7 100.04th Quarter 14.5 41.6 2.3 31.0 10.6 100.0

2009(Annual)(b) 15.5 42.1 2.6 29.2 10.6 100.01st Quarter 16.0 41.1 2.6 28.7 11.6 100.02nd Quarter 15.2 43.1 2.9 28.8 10.1 100.03rd Quarter 16.0 42.8 2.8 28.1 10.4 100.04th Quarter 14.8 41.4 2.3 31.1 10.4 100.0

PeriodEmpl-oyers

Self-Employed

UnpaidFamily

Workers

TotalPrivateSector

Employees

PublicSector

Employees

Table 4.11 Public Sector Employment

Source: Central Bank of Sri Lanka(a) Provisional(b) Central Government, Local Government and

Provincial Councils(c ) State Corporations, Statutory Boards and State

Authorities

2009(a) 2009/2008(a)

20082007 2008/2007

Sector

Government (b) 937,494 990,410 1,047,041 5.6 5.7Semi-government (c ) 259,116 261,318 266,543 0.8 2.0Public Sector 1,196,610 1,251,728 1,313,584 4.6 4.9

Percentage Change

Chart 4.2 Trends in Labour Force & Unemployment2005-2009

Labour Force Participation Rate (Left Axis)

Unemployment Rate (Right Axis)

4

5

6

7

8

9

10

47.0

48.0

49.0

50.0

51.0

52.0

2005

2006Q1

Q2

Q3

Q4

2007Q1

Q2

Q3

Q4

2008Q1

Q2

Q3

Q4

2009Q1

Q2

Q3

Q4

Percent

Year

Percent

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The continuation of youth unemployment,

especially among educated youth has been a

matter of concern. This problem was even more

acute among educated females than educated

males. In terms of the unemployment rate by level

of education, the highest unemployment rate of 11.2

per cent was among those with qualifications of

GCE (A/L) and above, followed by those with GCE

(O/L) qualifications (8.5 per cent). The persistent

mismatches between job opportunities in the market

and aspirations of the unemployed have partlycaused this problem.

The unemployment rate was more acute among

the age group of 15 24 years as observed during

the last few years. According to the estimates of

the QLFS, the unemployment rate among this age

group increased to 21.3 per cent from 18.8 per cent

in 2008. The unemployment rate of young females

was 27.9 per cent as compared to that of 17.1 per

cent among young males.

Foreign Employment

Overseas job opportunities continued to be a

vital source of employment in 2009. The steady

increase in foreign employment over the past

several years, contributed significantly to foreign

exchange earnings while reducing pressure on

the unemployment problem in Sri Lanka. However,

departures for foreign employment showed a slight

slowdown in the first quarter of 2009 but recovered

from this temporary set back from the second quarter

of 2009. This decline was due mainly to the reduced

demand for workers from overseas, as a result of the

global recession. The total number of departures for

foreign employment in 2009 was 247,119 compared

to 250,499 departures in 2008. The decline in

overseas employment was observed in categories

of professional, middle level, clerical and related,

and unskilled workers.

A number of proactive measures were taken

by the relevant authorities in 2009, to generate

more employment opportunities and to create

a better working environment with enhanced

social benefi ts for Sri Lankan migrants. Such

measures include the amendment of the Sri

Lanka Bureau of Foreign Employment (SLBFE)

Act No. 21 of 1985, for the purposes of curbing

illegal practices in the industry and for preventing

exploitation of migrant workers in the hands of

different parties including recruitment agents.

Another important policy implementation by the

SLBFE during 2009 was the decentralising of SLBFE

services through the opening of Provincial offices in

Badulla, Anuradhapura and Kandy. Similarly, under

the Negenahira Navodaya Programme, SLBFE

district centres were established in Trincomalee

and Batticaloa. Further, fixing of minimum salaries

especially for unskilled categories were also made

Table 4.12 Unemployment Rate (Unemployed as a percentage of Labour Force)

Category2009 (a)

All 6.0 5.2 5.4 5.3 6.3 5.8 5.4 5.7 5.5 6.2 5.9 5.7 5.8

By GenderMale 4.3 3.6 3.7 4.1 4.7 4.4 3.9 4.3 4.2 4.6 4.4 4.0 4.3Female 9.0 8.0 8.4 7.5 9.1 8.1 8.1 8.2 7.9 9.2 8.6 8.7 8.6

By Age Group15 - 19 21.6 20.6 20.8 17.8 26.6 20.4 20.3 21.2 18.3 25.0 20.6 19.7 20.920 - 29 15.0 13.2 13.7 14.8 15.5 15.3 14.7 15.1 15.2 15.2 15.5 15.7 15.430 - 39 3.3 3.1 3.1 3.5 4.1 3.9 3.1 3.6 3.3 4.3 3.9 3.3 3.740 and above 1.3 1.2 1.2 1.1 1.7 1.4 1.3 1.4 1.2 1.6 1.4 1.3 1.4

By Education LevelGrade 4/Year 5 and below 1.3 1.1 - - - - - - - - - - -

Grade 5-9/Year 6-10 5.2 4.5 4.5 4.3 5.7 5.2 4.4 4.9 4.4 5.7 5.3 4.5 5.0

GCE(O/L)/NCGE 8.2 7.4 7.8 8.9 8.6 8.5 6.5 8.1 9.3 8.6 9.1 6.9 8.5

GCE(A/L)/HNCE and above 11.8 9.9 10.5 10.1 10.4 10.3 12.5 10.8 10.6 10.4 10.2 13.4 11.2

AnnualQ4Q3Q22008(a)2007(a)


Q1

(a) Data exclude both Northern and Eastern Provinces.(b) Data exclude Northern Province.

2008(b)AnnualQ4Q3Q2Q1

2009 (b)

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during the year in order to uplift the working standardsof migrant workers. Meanwhile, supervision by Sri

Lanka missions was strengthened to prevent abuse

at work sites. Another important action initiated by

the SLBFE during the year was the organization of

a comprehensive database to facilitate the various

stakeholders, including migrant workers and job

aspirants abroad. These measures, together with

the expected welfare and promotion programmes

for migrant workers and enhancement of SLBFE

services to the Eastern and the Northern parts of the

island to be implemented in 2010, will have a positive

impact on foreign employment in the future.

Foreign employment cont inued to be an

important and stable source of foreign currency

inflows to the country. According to the SLBFE,

the Sri Lankan migrant population is around 1.8

million. Of the total migrant worker population,

female migrant workers dominated, registering a

major share of 70 per cent in 2009. The persistently

increasing trend observed in male migration over

the last few years reversed in 2009 and declined to

48 per cent from 51 per cent of total departures in

2008. Accordingly, the gender composition of male

to female departures registered a ratio of 48:52 of

total migration in 2009 compared to that of 51:49,

last year. The departure of housemaids increased

by 5.4 per cent to 113,777 in 2009 from 107,923

in 2008. Further, the SLBFE continued to explore

new opportunities in the non-traditional markets

targeting increased job opportunities in countries

outside the Middle Eastern region. Total foreignremittances received in 2009 increased by 14.1 per

cent to US dollars 3,330 million, compared to US

dollars 2,918 million received during the previous

year. The ending of the decades-long conflict,

the efforts to explore new market opportunities in

non-traditional markets, attempts to streamline

procedures and implementation of country specific

training programmes to prepare job aspirants to suit

labour market requirements abroad would lead to

further improvement in overseas job opportunities

and foreign exchange remittances to the country.

The Middle Eastern region continued to dominate

the foreign employment market, accounting

for more than 90 per cent of the total migrant

workforce, with the majori ty consist ing of

housemaids. Within the Middle East region,

Saudi Arabia, Doha Qatar, Kuwait and U.A.E.

accounted of 82.4 per cent of the total departures

for foreign employment in 2009. Of these countries,

departures to Saudi Arabia and Doha Qatar, which

alone contributed 49.2 per cent to the total migrant

workers, increased by 15.4 per cent and 10.8 per

cent, respectively, while that to Kuwait and U.A.E.

reported declines of 9.7 per cent and 22.5 per cent,

respectively in 2009 compared to that of 2008.

The share of housemaids in departures for foreign

employment increased to 46 per cent in 2009

compared to 43 per cent in the previous year. The

Memorandum of Understanding to be entered into by

the SLBFE with labour receiving countries namely,

Table 4.13 Departures for Foreign Employment

Employment2009(a)

Total Placements 218,459 100.0 250,499 100.0 247,119 100.0By Source

Licensed Agents 146,515 67.1 160,973 64.3 156,720 63.4Other 71,944 32.9 89,526 35.7 90,399 36.6

By Gender

Male 103,482 47.4 128,232 51.1 119,276 48.3Female 114,977 52.6 122,267 48.9 127,843 51.7

By Manpower Category

Professional 1,653 0.8 2,835 1.1 2,820 1.1Middle level 3,962 1.8 8,727 3.5 6,392 2.6Clarical & Related 4,551 2.1 6,791 2.7 6,706 2.7Skilled Labour 50,263 23.0 59,718 23.8 61,230 24.8Semi Skilled Labour 3,499 1.6 5,326 2.1 6,036 2.4Unskilled Labour 52,176 23.9 59,239 23.6 50,158 20.3Housemaid 102,355 46.9 107,923 43.1 113,777 46.0

Per centNumber

(a) Provisional

Per centNumber Per centNumber

2007 2008

Source: Sri Lanka Bureau of Foreign Employment

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Kuwait, Oman, J ordan and Lebanon for welfare and

protection of migrant employees at the work place

would make foreign employment more attractive.

In view of enhancing the benefits that the country

gains from foreign employment, further efforts arerequired to address the issues relating to health

and occupational safety of migrant workers, while

also addressing social implications, arising out of

foreign employment.

Labour Productivi ty

Overal l labour product iv i ty cont inued to

improve in 2009, following the trend observed

over the last few years. Labour productivity,

measured in terms of GDP per worker (at constantprices of 2002) increased by 4.2 per cent in 2009

over the previous year to Rs. 322,200 per worker. The

increase in productivity was attributed mainly to the

growth in productivity in the Industry (by 9.4 per cent)

and Agriculture (by 3.7 per cent) sectors, while the

productivity in the Services sector reported a marginalincrease of 1.3 per cent during the year. The greater

mechanisation of agriculture may have contributed

towards increasing the productivity. However, there

is further room to enhance the productivity in the

Agriculture sector, through increasing extension

services, use of improved seed varieties, technology

and mechanisation. Further, strengthening of value

addition agro-based processing industries would

help to develop the cultivation of food crops on

a sustainable basis. The continuous increase inlabour productivity is encouraging and would help to

achieve higher economic growth, while containing

inflationary pressures in the economy.

Table 4.14Foreign Employment Departures by

Destination

Source: Sri Lanka Bureau of Foreign Employment(a) Provisional

Share Per centNumberShare Number

Country

NumberQatar 39,476 15.7 43,744 17.7 4,268 10.8Saudi Arabia 67,441 26.9 77,826 31.5 10,385 15.4U A E 51,097 20.5 39,586 16.0 -11,511 -22.5Kuwait 46,941 18.7 42,400 17.2 -4,541 -9.7Other 45,544 18.2 43,563 17.6 -1,981 -4.3

Total 250,499 100.0 247,119 100.0 -3,380 -1.3

Change(a)2009(a)2008

Table 4.15Labour Productivity by Major

Economic Sector

Sources: Department of Census and StatisticsCentral Bank of Sri Lanka

(a) Provisional(b) Based on employment data excluding both

Northern and Eastern Provinces.(c) Based on employment data excluding

Northern Province.

2007 2009(a)2008

GDP at Constant (2002) Prices, Rs.million 2,232,656 2,365,501 2,449,304

Agriculture 265,870 285,897 294,921Industry 635,199 672,791 701,129Services 1,331,587 1,406,813 1,453,254

Labour Productivity, Rs.000 per person 317.0 (b) 309.3 (c) 322.2 (c)Agriculture 120.7 (b) 114.8 (c) 119.1 (c)Industry 339.0 (b) 335.6 (c) 367.0 (c)Services 449.0 (b) 446.1 (c) 451.8 (c)

Table 4.16 Strikes in Private Sector Industries

Year

Total

Man DaysLost

(a) Includes semi-government institutions and all other private institutions.(b) Provisional

Source: Department of Labour

Other(a)Plantation

WorkersInvolved

No. ofStrikes

Man DaysLost

WorkersInvolved

No. ofStrikes

Man DaysLost

WorkersInvolved

No. ofStrikes

2006 19 196,520 4,821,394 34 13,283 72,513 53 209,803 4,893,907

2007 8 1,468 6,089 17 6,079 36,109 25 7,547 42,198

2008 34 34,014 41,525 17 3,917 24,130 51 37,931 65,655

1st - - - 6 1,649 12,359 6 1,649 12,359

2nd Quarter 4 491 1,037 4 754 1,254 8 1,245 2,291

3rd Quarter 22 31,648 33,609 4 870 955 26 32,518 34,564

4th Quarter 8 1,875 6,879 3 644 9,562 11 2,519 16,4412009(b) 2 300 300 6 4,720 7,365 8 5,020 7,665

1st 2 300 300 3 3,095 6,190 5 3,395 6,490

2nd Quarter - - - 3 1,625 1,175 3 1,625 1,175

3rd Quarter - - - - - - - - -

4th Quarter - - - - - - - - -

Quarter

Quarter

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Labour Relations and Labour Market

Reforms

A welcome development was the decl ine in the

number of s trikes in the private sector to 8 in 2009

compared to 51 in the last year. Similarly, the totalman-days lost in 2009 also declined substantially to

7,665 compared to 65,655 in 2008. The number of

strikes in the plantation sector declined to 2 in 2009

compared with 34 in 2008. The total man-days lost

and workers involved also decreased significantly

due to improved industrial harmony among the

employers, workers and trade unions. The number of

strikes in the rest of the private sector declined to 6

in 2009 compared to 17 in the corresponding period

of the previous year. Although the total workers

involved in these strikes, increased from 3,917

to 4,720 during 2009, loss of man-days declined

dramatically by 69 per cent to 7,365 as compared

to 24,130 in the previous year. This favourable

development was a combined result of a number of

factors such as better relationships among parties,

greater transparency in management practices and

maintenance of a better social dialogue at the work

place to improve industrial harmony. The continuous

maintenance of a sound working environment is

essential to encourage investment and improve

productivity in the country.

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